BUY · CMP (as on 21 Jun 2019) Rs 771 Target Price Rs 895 Nifty . 11,724 Sensex . 39,194 KEY STOCK DATA Bloomberg AXSB IN No. of Shares (mn) 2,619 MCap (Rs bn) / ($ mn) 2,022/29,069

ANNUAL REPORT ANALYSIS 24 JUNE 2019

Axis Bank BUY

On track, mostly Over FY19, AXSB has demonstrated meaningful improvement in performance metrics. Profitability improved for the retail and wholesale businesses (loss in FY17 & 18). After growing briskly over FY17-18, SA traction slowed for the bank and system. With moderating slippages and LLPs, AXSB changed course over FY19 towards normalised earnings and RoAAs. Improving asset quality (with rising coverage), better risk practices, focus on high yielding retail products and cost consciousness will drive earnings. Maintain BUY with SOTP value of Rs 895 (2.8x FY21E ABV of Rs 309 + Rs 30 for subs). Granularity Improves: While deposits (top 20) remain

more concentrated vs. peers, business granularity improved over FY19. With retail deposits constituting ~80.6% of deposits, top 20 deposits contributed ~11.8%. The share of the top 20 advances/exposures dipped further to 8.6/12.4%, with retail loans constituting ~50% of advances (vs. 47% in FY18).

CASA Loses Steam: At 6%, the share of SA in incremental deposits hit a multi-year low. Systemic challenges in deposit growth, and the rising focus on retail TD + CASA contributed in part. The renewed focus was visible with Retail TDs forming 36.3% vs. 30.4%. However, avg CASA at ~43% and avg SA growth of ~16% are promising.

Retail Business Back on Track: After an unimpressive FY18, retail operating metrics improved with a 26/59% NII/PPOP growth. In spite of elevated provisions (1%), PBT doubled with an RoAA of ~1.72% (still lower vs.

FY16/17). Faster growth in high yielding retail loans and oplev will improve performance hereon.

Asset Quality: After a severe setback in FY17/18, asset quality improved over FY19. Industry GNPAs improved from ~15.2% to ~11.3% led by an improvement in Infra (24% vs. 29% YoY) and Metals (4.9% vs. 17.1% YoY). CRE NPAs are already ~10%+. While agri NPAs increased (5.5% vs. 3.9% YoY), PL NPAs dipped (79bps vs. 1.2% YoY). Moderating slippages and normalization of LLPs will drive earnings hereon.

Other Highlights: (1) After two years of losses, the wholesale business turned profitable, (2) 6.5mn options granted, O/S ESOPs equal 1.2% of capital, (3) Avg. tenure of loans was stable at 3.3 years whereas the avg. tenure of liabilities dipped slightly to 2.2 years, (4) Banca fees grew ~14% to contribute ~14% of overall fees, (5) Dividend from subs halved to ~Rs 1.3bn (7bps vs. 160bps of PPOP) and (6) Overall asset growth outpaced RWA growth and RWA/ Assets dipped to ~69% vs. ~75%.

FINANCIAL SUMMARY YE Mar (Rs mn) FY17 FY18 FY19 FY20E FY21E Net Interest Income 180,931 186,177 217,082 254,129 297,044 PPOP 175,845 155,945 190,051 219,530 261,272 PAT 36,793 2,757 46,766 89,168 127,980 EPS (Rs) 15.4 1.1 18.2 34.1 48.9 ROAE (%) 6.8 0.5 7.2 12.4 15.4 ROAA (%) 0.65 0.04 0.63 1.05 1.32 Adj. BVPS (Rs) 196.8 182.6 215.4 261.1 309.2 P/ABV (x)# 3.77 4.06 3.44 2.84 2.40 P/E (x)# 48.3 690.2 40.8 21.8 15.2 Source: Company, HDFC sec Inst Research; # Adj for Subsidiaries

INDUSTRY BANKS CMP (as on 21 Jun 2019) Rs 771 Target Price Rs 895 Nifty 11,724 Sensex 39,194 KEY STOCK DATA Bloomberg AXSB IN No. of Shares (mn) 2,619 MCap (Rs bn) / ($ mn) 2,022/29,069 6m avg traded value (Rs mn) 7,133 STOCK PERFORMANCE (%) 52 Week high / low Rs 828/499 3M 6M 12M Absolute (%) 2.1 24.3 50.5 Relative (%) 0.0 14.7 39.8 SHAREHOLDING PATTERN (%) Dec-18 Mar-19 Promoters 23.7 18.7 FIs & Local MFs 17.7 19.6 FPIs 45.9 49.6 Public & Others 12.7 12.6 Pledged Shares Nil Nil Source : BSE

Darpin Shah [email protected] +91-22-6171-7328

Aakash Dattani [email protected] +91-22-6171-7337

HDFC securities Institutional Research is also available on Bloomberg HSLB <GO> & Thomson Reuters

AXIS BANK : ANNUAL REPORT ANALYSIS

AXIS BANK : ANNUAL REPORT HIGHLIGHTS

FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Sectoral GNPA (%) Agri & Allied 2.33 2.36 2.83 2.26 2.44 3.25 3.93 5.51 Industry 0.75 1.09 1.25 1.65 2.22 9.61 15.20 11.29 Services 0.96 1.60 1.94 1.70 2.04 4.96 3.85 4.11 PL 0.81 0.64 0.57 0.61 0.69 0.89 1.17 0.79 GNPA : PSL (%) Agri & Allied - - 2.83 2.26 2.44 3.25 3.93 5.51 Industry (eligible for PSL) - - 1.38 1.53 1.75 3.11 3.70 3.36 Services - - 0.66 0.62 1.78 2.69 3.39 3.35 PL - - 0.36 0.48 0.65 0.76 1.68 0.84 Total - - 1.29 1.21 1.59 2.26 3.07 2.92 GNPL : NoN PSL (%) Agri & Allied - - - - - - - - Industry - - 1.22 1.67 2.29 10.67 17.23 12.76 Services - - 2.37 2.03 2.11 5.50 3.93 4.29 PL - - 0.64 0.65 0.70 0.93 1.05 0.78 Total - - 1.29 1.41 1.75 6.18 7.84 6.05 GNPA (%) Substandard 31.07 29.01 34.69 25.75 26.51 27.44 23.13 16.90 Doubtful 1 8.17 18.99 8.28 21.82 21.46 25.64 34.45 21.53 Doubtful 2 8.12 4.43 15.30 14.50 28.26 19.76 28.66 42.36 Doubtful 3 1.14 2.83 2.26 1.10 0.93 2.22 6.72 4.76 Loss 51.49 44.75 39.48 36.84 22.83 24.94 7.04 14.46 GNPA Movement (Rs bn) Opening Balance 16.0 18.1 23.9 31.5 41.1 60.9 212.9 342.5 Slippages 18.4 20.2 25.5 28.5 72.4 217.8 334.2 138.7 Slippages Ratio (%) 1.18 1.10 1.19 1.12 2.34 6.12 8.22 2.97 Less Deductions: 16.3 13.8 17.9 18.9 52.6 65.9 204.5 183.3 Upgradation 7.4 3.3 3.3 3.2 3.4 21.8 49.1 50.7 Recoveries 2.2 2.5 5.4 3.6 16.8 21.8 38.5 40.3 W/o 6.7 8.0 9.2 12.2 32.3 22.2 116.9 92.3 Closing Balance 18.1 24.5 31.5 41.1 60.9 212.9 342.5 298.0 Top 4 GNPAs (Rs bn) 5.82 9.38 6.51 9.31 11.21 49.84 53.40 45.14 Loan Mix (%) SME 13.2 14.4 14.8 15.3 13.2 13.2 13.4 13.3 Agri 9.8 10.3 10.0 10.2 10.2 9.4 8.4 8.5 Retail 26.9 31.4 36.8 39.8 40.9 45.0 47.0 49.7 Corp 50.3 47.1 42.7 38.5 45.9 41.8 39.7 37.1

Source : Company, HDFC sec Inst Research

Improvement in Industry NPA was led by the Infra (24% vs. 29% YoY) and Metals (4.9% vs. 17.1% YoY)

Of which Home loan NPAs are 89bps and Vehicle Loan NPAs are 95bps

As with peers, the share of retail loans continues to rise at the expense of corporate loans

Large scale migration from D1 to D2 occurred in FY19 due to ageing

With lower fresh slippages, the share of substandard and D1 categories reduced

~89% of corporate slippages were from the BB and below rated portfolio in FY19

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AXIS BANK : ANNUAL REPORT HIGHLIGHTS (cont’d)

FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 EXPOSURE (Fund based + non-fund based, %)

Infra 7.7 7.7 8.0 7.8 8.3 6.7 5.5 5.3 Power 8.1 6.8 5.5 4.9 5.0 3.6 3.0 2.7 Total Infra 15.8 14.5 13.5 12.7 13.3 10.3 8.4 8.0 Textile 1.6 1.5 1.5 1.5 1.6 1.1 1.0 1.1 Gems/Jewel 0.6 0.8 0.4 0.4 0.4 - 0.3 - Iron/Steel 4.3 4.1 3.8 4.3 4.7 4.4 3.4 3.8 CRE 2.2 2.1 2.5 2.6 3.5 2.2 2.3 2.2 Total Stressed Sector Exposure 24.4 22.9 21.7 21.5 23.5 18.1 15.6 15.1

LOAN MIX : usage wise (%) Working capital 29.9 30.6 31.3 30.5 29.9 29.7 34.3 33.5 Tem loan 70.1 69.4 68.7 69.5 70.1 70.3 65.7 66.5

PSL Loans (%) 33.6 29.1 32.3 29.7 28.3 28.9 25.6 26.0 Unsecured Loans (%) 13.6 17.2 16.6 20.7 23.6 22.1 28.8 27.9

RATING MIX Corporate (%) AAA 8.0 9.0 11.0 10.0 12.0 12.0 13.0 12.0 AA 19.0 16.0 15.0 20.0 20.0 25.0 34.0 39.0 A 40.0 37.0 35.0 32.0 30.0 29.0 30.0 31.0 Sub-total A and above 67.0 62.0 61.0 62.0 62.0 66.0 77.0 82.0 BBB 30.0 32.0 30.0 29.0 28.0 22.0 18.0 14.0 <BBB or unrated 3.0 6.0 9.0 9.0 10.0 12.0 5.0 4.0

SME (%) SME1 5.0 6.0 7.0 8.0 7.0 6.0 6.0 11.0 SME2 18.0 16.0 15.0 15.0 14.0 14.0 16.0 9.0 SME3 57.0 58.0 58.0 61.0 63.0 66.0 66.0 65.0 SME4 12.0 12.0 13.0 9.0 8.0 9.0 6.0 8.0 SME 5-8 9.0 8.0 7.0 7.0 8.0 5.0 6.0 7.0

Concentration (%) Top-20 Advances 11.87 10.59 11.00 11.01 10.21 11.13 10.27 8.56 Top-20 Exposures 12.29 11.82 12.49 13.06 12.41 13.06 13.21 12.35


Sharp rise in the share of loans rated SME 1

Increase in A and above rated loans is a result of a conscious change in risk filters with ~95% of incremental loans rated A- and above

Sharp dip in the share of top 20 advances and a marginal dip in the share of top 20 exposures indicate possible concentrated investments and/or non-fund based exposures

Considerable reduction in exposure to stressed sectors over the years

The slight uptick in the share of term loans in FY19 after reducing over FY16-FY18 is surprising

CRE NPAs are ~10.5% vs. ~9.3% in FY18 and ~4% in FY17

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FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Maturity Profile of Loans Avg Tenure (years) 3.12 3.18 3.39 3.27 3.33 3.31 3.39 3.33 Maturity profile Upto 6 months 16% 15% 11% 14% 14% 16% 15% 15% 6-12 months 7% 6% 6% 7% 8% 6% 6% 6% 1-3 years 23% 23% 23% 21% 18% 17% 17% 19% 3-5 years 14% 13% 13% 12% 13% 13% 13% 12% Above 5 years 40% 42% 47% 46% 47% 47% 49% 48% CASA Contribution (Rs bn) SA Rs bn 517 638 778 883 1,058 1,260 1,482 1,541 % Chg 26.5 23.4 21.9 13.5 19.8 19.1 17.6 4.0 % of Deposits 23.5 25.2 27.7 27.4 29.6 30.4 32.7 28.1 Incremental Contribution (%) 35.0 37.3 49.4 25.3 49.3 35.9 56.5 6.2 CA 398 483 487 561 637 870 956 893 % Chg 7.7 21.6 0.8 15.2 13.4 36.7 9.9 (6.7) % of Deposits 18.1 19.1 17.3 17.4 17.8 21.0 21.1 16.3 Incremental Contribution (%) 9.2 26.4 1.3 17.9 21.2 41.4 22.0 (6.7) Per Branch (Rs mn) SA 319 328 324 341 364 382 400 381 CA 245 248 203 217 219 263 258 220 CASA 564 576 526 558 583 645 659 601 Deposits 1,357 1,297 1,170 1,245 1,233 1,254 1,225 1,354 Top-20 Deposits (%) 14.14 13.89 13.63 12.61 10.90 11.60 11.44 11.83 Maturity Profile of Deposits Avg Tenure (years) 2.04 2.41 2.51 2.68 2.59 2.59 2.62 2.24 Maturity Profile Upto 6 months 34% 31% 29% 25% 26% 30% 31% 35% 6-12 months 24% 14% 18% 13% 19% 16% 15% 20% 1-3 years 8% 13% 9% 17% 10% 8% 8% 7% 3-5 years 6% 9% 7% 5% 3% 2% 4% 2% Above 5 years 28% 32% 37% 40% 41% 44% 43% 36%

Bancassurance fees (Rs bn) 3.7 5.1 6.6 8.6 8.9 10.0 10.7 12.2 % of CEB 8.6 10.2 12.3 14.1 13.3 14.2 13.9 13.8 % of other income 6.9 7.8 8.9 10.3 9.5 8.5 9.8 9.3 % of PPoP 5.0 5.5 5.8 6.4 5.5 5.7 6.9 6.4 % of PAT 8.8 9.9 10.6 11.7 10.8 27.1 389.2 26.2


With the increasing share of unsecured retail loans and focus on working capital loans, the average tenure of advances is likely to fall

After brisk growth in FY17&18, SA growth slowed. The 6% share of incremental deposits and 4% YoY growth were at multi-year lows

In spite of sluggish CASA growth, the average tenure of deposits dipped

As SA growth has slowed for the system, the bank is now focused on CASA+ Retail TD

Retail deposits constituted ~81% of total deposits and retail TDs were ~36% of deposits

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FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Fee Income Break-up (Rs bn) Large and Mid Corporate 17.1 17.8 17.9 18.2 18.9 18.4 16.0 13.4 Treasury 9.7 11.7 13.4 14.1 8.1 1.3 1.8 2.6 Agri and SME banking 2.9 3.6 3.9 3.7 3.9 4.2 4.3 4.5 Business banking 4.3 4.5 4.9 5.7 13.6 15.3 17.6 19.4 Capital Markets 0.6 0.6 0.3 - - - - - Retail Banking 12.8 17.1 19.3 25.9 30.3 39.8 48.9 61.5 Total Fee Income 47.3 55.2 59.6 67.6 74.7 78.8 88.6 101.3

% of total fees Large and Mid Corp 36.1 32.2 30.0 26.9 25.2 23.3 18.0 13.2 Treasury 20.4 21.2 22.4 20.9 10.9 1.6 2.1 2.5 Agri and SME banking 6.1 6.5 6.5 5.5 5.2 5.3 4.9 4.5 Business banking 9.2 8.1 8.2 8.4 18.2 19.4 19.9 19.1 Capital Markets 1.2 1.0 0.5 - - - - - Retail Banking 27.0 31.0 32.4 38.3 40.5 50.4 55.1 60.7

Dividend from Subsidiaries Rs mn 11 15 19 338 1,398 1,765 2,561 1,311 % of total non-interest income 0.0 0.0 0.0 0.4 1.5 1.5 2.3 1.0 % of PPoP 0.0 0.0 0.0 0.3 0.9 1.0 1.6 0.7 % of PAT 0.0 0.0 0.0 0.5 1.7 4.8 92.9 2.8

Contingent Liability (CL) Rs bn 4,802 5,481 5,748 5,912 6,174 6,696 7,353 7,558 % Change 7.8 14.1 4.9 2.8 4.4 8.5 9.8 2.8 CL/BS (x) 1.7 1.6 1.5 1.3 1.2 1.1 1.1 0.9 CL/NW (x) 21.1 16.6 15.0 13.2 11.6 12.0 11.6 11.3

ESOP Outstanding ESOP (in mn) - 10.9 41.8 41.8 35.5 29.7 29.6 30.1 % O/s number of shares - 0.5 1.8 1.8 1.5 1.2 1.2 1.2

Risk Weighted Assets Rs bn 2,317 2,584 2,838 3,452 4,039 4,848 5,176 5,520 % Change 17.9 11.5 9.9 21.6 17.0 20.0 6.8 6.6 % Assets 81.1 75.9 74.1 74.7 76.9 80.6 74.9 68.9 PAT % RWA 1.83 2.00 2.19 2.13 2.04 0.76 0.05 0.85


Large and mid corporate fees continue to fall

Sharp rise in retail banking fees

The dividend received from subsidiaries halved YoY with nil dividend from Axis Finance vs. Rs 1.2bn in FY18

Slow growth in contingent liabilities may be a result of capital consciousness which in turn resulted in a dip in the RWA/Assets Ratio

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FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Segment Performance : RETAIL (Rs bn) Loans 487 655 880 1,119 1,385 1,680 2,065 2,458 NII 27.6 38.5 46.7 59.5 76.3 96.6 96.3 121.9 Other Income 12.4 16.1 16.2 21.5 27.0 30.9 39.9 52.2 Total Income 40.0 54.6 62.9 81.0 103.3 127.5 136.2 174.1 Opex 37.6 47.1 54.1 64.7 70.7 83.1 97.5 112.7 PPOP 2.4 7.4 8.8 16.3 32.6 44.4 38.6 61.5 Provisions 2.5 2.3 3.3 4.6 5.1 8.4 18.6 22.5 PBT (0.0) 5.1 5.5 11.8 27.4 36.0 20.0 39.0

Growth (%) Loans 35.3 34.6 34.4 27.2 23.8 21.3 22.9 19.1 NII 3.5 39.2 21.4 27.5 28.3 26.6 (0.4) 26.6 Other Income 25.1 30.0 0.5 32.9 25.4 14.5 29.2 31.0 Total Income 9.3 36.4 15.2 28.9 27.5 23.4 6.8 27.9 Opex 31.6 25.4 14.7 19.7 9.3 17.5 17.4 15.5 PPOP (69.9) 208.2 18.4 85.2 99.5 36.4 (13.1) 59.2 Provisions (40.3) (6.4) 43.3 37.8 13.0 63.6 121.1 20.9 PBT (101.2) NA 7.2 113.6 132.9 31.3 (44.4) 94.9

RoAA (%) NII 6.53% 6.74% 6.08% 5.95% 6.09% 6.30% 5.14% 5.39% Other Income 2.93% 2.82% 2.11% 2.15% 2.15% 2.02% 2.13% 2.31% Total Income 9.45% 9.56% 8.19% 8.10% 8.25% 8.32% 7.27% 7.70% Opex 8.88% 8.26% 7.04% 6.47% 5.65% 5.42% 5.21% 4.98% PPOP 0.57% 1.30% 1.15% 1.63% 2.60% 2.90% 2.06% 2.72% Provisions 0.58% 0.40% 0.43% 0.46% 0.41% 0.55% 0.99% 0.99% PBT -0.01% 0.90% 0.72% 1.18% 2.19% 2.35% 1.07% 1.72%


NII and other income growth picked up in FY19, faster than the growth in retail assets indicating an increase in yields

Retail provisions remained elevated

Higher provisions kept RoAAs under check

Opex growth was contained. With increasing reliance on technology and set up of low cost branches, oplev is likely to improve further

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FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Segment Performance : WHOLESALE (Rs bn) Loans 911 982 1,022 1,082 1,554 1,559 1,744 1,834 NII 48.4 59.4 66.5 70.4 78.4 85.2 68.5 89.2 Other Income 28.0 28.4 30.2 31.0 32.6 29.6 28.1 43.2 Total Income 76.4 87.8 96.7 101.4 110.9 114.8 96.6 132.4 Opex 17.4 16.2 20.1 22.6 25.3 33.2 37.3 38.0 PPOP 59.0 71.6 76.6 78.8 85.7 81.7 59.3 94.4 Provisions 7.4 16.1 17.7 18.6 30.1 100.4 118.5 90.3 PBT 51.7 55.4 58.9 60.2 55.6 (18.8) (59.3) 4.2

Growth (%) Loans 19.9 7.9 4.1 5.9 43.6 0.3 11.9 5.1 NII 28.6 22.8 12.1 5.8 11.3 8.7 (19.7) 30.3 Other Income 22.3 1.5 6.1 2.9 4.9 (9.1) (5.0) 53.6 Total Income 26.2 15.0 10.1 4.9 9.4 3.5 (15.9) 37.1 Opex 20.5 (6.6) 24.2 12.4 11.8 31.2 12.5 1.8 PPOP 28.0 21.3 7.0 2.9 8.7 (4.7) (27.4) 59.3 Provisions 1.3 119.4 9.4 5.3 61.7 234.1 18.0 (23.8) PBT 33.0 7.3 6.3 2.2 (7.7) (133.7) 215.8 NA

RoAA (%) NII 5.79% 6.27% 6.64% 6.69% 5.95% 5.48% 4.15% 4.99% Other Income 3.35% 3.00% 3.01% 2.95% 2.47% 1.90% 1.70% 2.41% Total Income 9.15% 9.28% 9.65% 9.64% 8.42% 7.38% 5.85% 7.40% Opex 2.08% 1.71% 2.01% 2.15% 1.92% 2.13% 2.26% 2.12% PPOP 7.07% 7.56% 7.64% 7.49% 6.50% 5.25% 3.59% 5.28% Provisions 0.88% 1.71% 1.76% 1.77% 2.28% 6.45% 7.18% 5.04% PBT 6.19% 5.86% 5.88% 5.72% 4.22% -1.21% -3.59% 0.23%


The wholesale business made a profit (albeit marginal) after 2 years of losses on account of higher provisions

Provisions dipped in FY19, after peaking in FY18 Provisions will dip further, resulting in normalised profits

The sharp growth in wholesale NII compared to assets indicates a rise in yields; lower interest reversals

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P/ABV Band Chart


SOTP Rs bn Per Share Rationale

Axis Bank – Standalone 2,226 866 2.8x FY21E ABV of Rs 309 Axis Finance (NBFC) 57 22 3x FY21E BV Axis AMC (Asset Management) 17 7 20x FY21E PAT Axis Capital (IB and Institutional Broking) 12 4 15x FY21E PAT Axis Securities (Retail Broking and Cross Sell) 10 4 12x FY21E PAT Total Value of Subsidiaries 95 37 Less : 20% Holding Discount 19 7 Total SOTP Value 2,302 895 Current Value 1,983 771 Upside (%) 16% 16%

0

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PEER VALUATIONS

BANK Mcap (Rs bn)

CMP (Rs) Rating TP

(Rs) ABV (Rs) P/E (x) P/ABV (x) ROAE (%) ROAA (%)

FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E KMB # 2,844 1,490 BUY 1,481 209 236 272 47.1 37.7 30.8 5.74 5.00 4.28 12.7 13.6 14.3 1.70 1.75 1.76 ICICIBC # 2,778 431 BUY 454 138 153 172 63.5 19.2 13.4 2.41 2.14 1.87 3.3 9.2 12.0 0.36 1.07 1.34 AXSB# 2,022 771 BUY 895 215 261 309 40.8 21.8 15.2 3.44 2.84 2.40 7.2 12.4 15.4 0.63 1.05 1.32 IIB 1,003 1,449 BUY 1,964 400 515 561 26.4 20.5 14.8 3.62 2.81 2.58 13.3 16.1 18.0 1.32 1.56 1.73 RBL 294 612 BUY 803 169 243 268 30.1 24.1 18.2 3.63 2.52 2.29 12.2 12.5 12.7 1.22 1.31 1.34 FB 204 103 NEU 98 59 65 76 16.4 12.8 9.6 1.75 1.57 1.36 9.8 11.5 13.8 0.84 0.93 1.05 CUB 155 212 BUY 240 58 68 80 22.7 19.7 16.7 3.66 3.09 2.65 15.2 15.1 15.4 1.60 1.61 1.61 DCBB 71 230 BUY 228 88 99 114 21.9 16.6 12.5 2.62 2.31 2.01 11.0 13.0 15.2 0.99 1.09 1.20 KVB 58 73 NEU 84 50 52 60 27.6 17.6 10.1 1.45 1.39 1.21 3.3 5.1 8.7 0.31 0.45 0.71 SBIN # 3,119 349 BUY 383 146 188 222 269.0 9.4 6.4 1.78 1.38 1.15 0.4 10.6 13.9 0.02 0.64 0.84 AUBANK 211 698 BUY 680 101 128 151 53.4 37.7 27.0 6.90 5.45 4.62 14.1 15.3 17.2 1.48 1.49 1.61 Source: Company, HDFC sec Inst Research; # Adjusted for Subsidiaries

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Income Statement (Rs mn) FY17 FY18 FY19 FY20E FY21E Interest Earned 445,422 457,803 549,858 651,187 761,494 Interest Expended 264,490 271,626 332,776 397,058 464,450 Net Interest Income 180,931 186,177 217,082 254,129 297,044 Other Income 116,913 109,671 131,303 140,481 160,135 Fee Income (CEB) 70,283 77,299 88,537 99,649 115,145 Treasury Income 31,738 13,252 7,581 8,500 9,500 Total Income 297,844 295,848 348,385 394,610 457,179 Total Operating Exp 121,999 139,903 158,334 175,080 195,907 Employee Expense 38,919 43,130 47,473 51,907 57,394 PPOP 175,845 155,945 190,051 219,530 261,272 Provisions & Contingencies 121,170 154,729 120,310 97,382 84,748 Prov. for NPAs (incl. std prov.) 115,055 164,544 110,313 94,382 81,748 PBT 54,676 1,216 69,741 122,148 176,524 Provision for Tax 17,883 -1,541 22,975 32,980 48,544 PAT 36,793 2,757 46,766 89,168 127,980

Source: Bank, HDFC sec Inst Research

Balance Sheet (Rs mn) FY17 FY18 FY19 FY20E FY21E SOURCES OF FUNDS Share Capital 4,790 5,133 5,143 5,234 5,234 Reserves 552,835 629,320 661,620 768,487 881,470 Shareholder's Funds 557,625 634,453 666,763 773,721 886,704 Savings 1,260,483 1,482,020 1,541,288 1,733,949 1,959,362 Current 870,017 956,496 892,653 959,602 1,031,572 Term Deposit 2,013,288 2,097,711 3,050,772 3,551,601 4,292,139 Total Deposits 4,143,788 4,536,227 5,484,713 6,245,153 7,283,074 Borrowings 1,050,309 1,480,161 1,527,758 1,594,877 1,779,012 Other Liabilities & Provisions 262,955 262,455 330,731 380,705 438,440 Total Liabilities 6,014,677 6,913,296 8,009,965 8,994,455 10,387,231

APPLICATION OF FUNDS Cash & Bank Balance 502,562 434,549 672,046 550,493 589,591 Investments 1,287,934 1,538,761 1,749,693 1,961,078 2,221,198 G-Secs 905,981 1,013,546 1,168,229 1,298,992 1,493,030 Advances 3,730,693 4,396,503 4,947,980 5,776,766 6,773,259 Fixed Assets 37,469 39,717 40,366 42,385 44,504 Other Assets 456,019 503,766 599,880 663,733 758,679 Total Assets 6,014,677 6,913,296 8,009,965 8,994,455 10,387,231


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Key Ratios

FY17 FY18 FY19 FY20E FY21E Valuation Ratios EPS 15.4 1.1 18.2 34.1 48.9 Earnings Growth (%) (55.3) (92.5) 1,596.4 90.7 43.5 BVPS (Rs.) 232.8 247.2 259.3 295.7 338.8 Adj. BVPS (Rs; 100% cover) 196.8 182.6 215.4 261.1 309.2 DPS (Rs) 5.0 0.0 1.0 2.6 4.9 ROAA (%) 0.7 0.0 0.6 1.0 1.3 ROAE (%) 6.8 0.5 7.2 12.4 15.4 P/E (x) 48.3 690.2 40.8 21.8 15.2 P/ABV (x) 3.77 4.06 3.44 2.84 2.40 P/PPOP (x) 2.0 2.4 2.0 1.8 1.5 Dividend Yield (%) 0.6 - 0.1 0.3 0.6 Profitability Yield on Advances (%) 9.31 8.40 8.84 9.19 9.33 Yield on Investment (%) 7.67 7.06 6.90 7.10 7.10 Cost of Deposits (%) 5.09 4.42 4.73 5.13 5.27 Core Spread (%) 3.89 3.55 3.74 3.85 3.84 NIM (%) 3.64 3.32 3.33 3.38 3.45 Operating Efficiency Cost/Avg. Asset Ratio (%) 2.2 2.2 2.1 2.1 2.0 Cost-Income Ratio (Excl Treasury) 45.8 49.5 46.5 45.3 43.8 Balance Sheet Structure Ratios Loan Growth (%) 10.1 17.8 12.5 16.8 17.3 Deposit Growth (%) 15.8 9.5 20.9 13.9 16.6 C/D Ratio (%) 90.0 96.9 90.2 92.5 93.0 Equity/Assets (%) 9.3 9.2 8.3 8.6 8.5 Equity/Loans (%) 14.9 14.4 13.5 13.4 13.1 CASA (%) 51.4 53.8 44.4 43.1 41.1 Capital Adequacy Ratio (CAR, %) 15.0 16.6 15.8 15.7 15.3 W/w Tier I (%) 11.9 13.0 12.5 12.7 12.5

FY17 FY18 FY19 FY20E FY21E Asset Quality Gross NPLs (Rs mn) 212,862 342,544 297,954 251,457 219,831 Net NPLs (Rs mn) 86,266 165,917 112,756 90,429 77,657 Gross NPLs (%) 5.04 6.77 5.26 4.35 3.25 Net NPLs (%) 2.11 3.40 2.06 1.57 1.15 Slippages (%) 6.12 8.22 2.97 2.05 1.70 Coverage Ratio (%) 59.5 51.6 62.2 64.0 64.7 Provision/Avg. Loans (%) 3.13 4.08 2.19 1.69 1.24 RoAA Tree Net Interest Income 3.21% 2.88% 2.91% 2.99% 3.07% Non Interest Income 2.07% 1.70% 1.76% 1.65% 1.65% Treasury Income 0.56% 0.21% 0.10% 0.10% 0.10% Operating Cost 2.17% 2.16% 2.12% 2.06% 2.02% Provisions 2.15% 2.39% 1.61% 1.15% 0.87% Provisions for NPAs 1.98% 2.57% 1.37% 1.07% 0.80% Tax 0.32% -0.02% 0.31% 0.39% 0.50% ROAA 0.65% 0.04% 0.63% 1.05% 1.32% Leverage (x) 10.3 10.8 11.5 11.8 11.7 ROAE 6.76% 0.46% 7.19% 12.38% 15.42%


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RECOMMENDATION HISTORY

Rating Definitions BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

Date CMP Reco Target 5-Jun-18 537 NEU 539 6-Jul-18 511 NEU 538

31-Jul-18 570 NEU 542 9-Oct-18 557 NEU 603 1-Nov-18 582 BUY 718 3-Nov-18 610 BUY 718 8-Jan-19 637 BUY 741

30-Jan-19 661 BUY 743 20-Mar-19 756 BUY 894 9-Apr-19 754 BUY 894

26-Apr-19 741 BUY 896 24-Jun-19 771 BUY 895

400450500550600650700750800850900

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Apr-

19

May

-19

Jun -

19

Axis Bank TP

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Documents

BUY · CMP (as on 21 Jun 2019) Rs 771 Target Price Rs 895 Nifty . 11,724 Sensex . 39,194 KEY STOCK DATA Bloomberg AXSB IN No. of Shares (mn) 2,619 MCap (Rs bn) / ($ mn) 2,022/29,069